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Commissioner of Public Lands Hilary Franz has terminated Cooke Aquaculture’s lease to operate Atlantic salmon farms at its Cypress Island site, where a second fish farm is at risk of catastrophic collapse, state inspectors say.

In a letter to Cooke managers sent Saturday, Franz said the lease is terminated immediately and the company should wind up its operations and clear out of the site in the San Juan Islands, where one of three pens fell apart last August, releasing more than 260,000 Atlantic salmon in Puget Sound.

The termination comes just days after state investigators released a report blaming the net-pen failure on company negligence. The investigators also said the company misled the public and regulators about the scope and causes of the collapse.

The company, one of the largest Atlantic salmon farmers in North America, has disputed the findings.

It is the second time in three months Franz has acted to end Cooke’s leases. The company lost its lease at Port Angeles in December and now has only four of its original nine sites in Washington available for operation. The two terminations cancel about 42 percent of the company’s production capacity of Atlantic salmon in Puget Sound, according to the state Department of Natural Resources (DNR). Its remaining locations are in Rich Passage and near Anacortes at Hope Island.

The reasons for the most recent lease termination are inadequate maintenance of the net pens and the company’s invalid use of the lease, Franz said.

“Cooke has flagrantly violated the terms of its lease at Cypress Island,” Franz said. “The company’s reckless disregard endangered the health of our waters and our people, and it will not be tolerated.

“On behalf of all Washingtonians, and in fulfillment of my duty to protect our state’s waters, I am terminating the lease.”

Joel Richardson, vice president of public relations for Cooke, said in a Saturday email to The Seattle Times that the company had just learned of the termination.

“We will reserve comment until we’ve had the proper time to review the letter and assess its impact on our operations and our employees’ livelihoods,” Richardson said.

Three sites affected

The termination affects all three of Cooke’s sites at Cypress Island, which operated under one lease. Site 2, where the pen failed last August, was destroyed and has been removed. Sites 1 and 3 are now empty of fish after the harvest last month, but they were available to be restocked.

Cooke installed two improvements, a feed barge facility and an office platform, without advance permission from the Department of Natural Resources and without a required performance bond, according to the termination letter, sent Feb. 2. Both are considered violations of the lease.

Cooke also failed to maintain the net pen at Site 1, according to the letter. A department inspection found the facility “in poor condition, likely past the end of its service life, and in danger of catastrophic failure,” according to the letter.

The lease requires the net pens and mooring be maintained “in good order and repair, in a clean, attractive and safe condition.”

Anchors securing Site 1 are outside of the leasehold, another lease violation, DNR found.

State report released

The company was found to have not properly maintained its Site 2 facility, causing its collapse. In the investigative report released Jan. 29, the state departments of Natural Resources, Fish and Wildlife and Ecology found that Cooke had allowed 110 tons of mussels and other sea life to accumulate on the nets at Site 2, creating forces of lateral drag during even normal tidal surges that crushed the pen and allowed fish to escape. That too was a violation of Cooke’s lease.

The three agencies found that Cooke misled the public and state as to the causes and extent of an earlier mishap at the site, as well as the number of fish that escaped in August and remained unaccounted for, which the state counted at more than twice Cooke’s reported number. Cooke had reported 160,000 fish escaped, and 100,000 remained unaccounted for. But the state says up to 263,000 Atlantic salmon were released to Puget Sound and as many as 206,000 remain unaccounted for.

Furthermore the company did not clean up the mess it left behind at Deepwater Bay after the implosion of the Site 2 net pen, as required by the Department of Natural Resources. “We gave them 60 days to clean up all the waste and debris, and they stated it was removed,” Franz said. “We went in there and we determined they did not remove it all.”

The state Ecology agency fined Cooke $332,000 for water-quality violations before and during the net-pen collapse at Cypress Island, which the company can appeal.

Port Angeles operation

In that case, Franz said she terminated the lease because anchors tethering the farm to the sea floor were outside the boundaries of the leasehold. The company also failed to adequately contain a large Styrofoam float to keep it from deteriorating into the water, according to the DNR.

Cooke has said that termination was based on miscommunication and misunderstanding and that it was in the process of correcting the problems.

DNR has been conducting inspections at all of Cooke’s operations since the August collapse. Inspections are continuing at the remaining farms at Hope Island and Rich Passage.

Cooke disputed the agencies’ investigative report, particularly the state’s fish count in a statement issued Jan. 30. Richardson said of the report in a prepared statement “investigators with limited experience … produced an inaccurate and misleading document that appears to be intended to fuel the push by aquaculture opponents to put Cooke out of business in Washington State.” Agency managers pushed back, saying Cooke misled the public and the state about the causes of the escape and its effects.

Cooke, based in New Brunswick, Canada, bought its Washington farms from Icicle Seafoods in May 2016 in an acquisition valued at $70 million. It has fish farms in multiple countries and employs about 5,000 people worldwide. Its annual payroll in Washington is $8.5 million.

The purchase of the Washington farms was part of the company’s strategy to grow by acquisition. In December, Cooke bought a Texas producer of fish oil and fish meal in a transaction valued at $500 million.

This story has been updated to clarify numbers regarding the number of fish released in the spill, compared with the number reported by Cooke Aquaculture.